Please
find attached our take on MAS semi-annual policy statement that was released
this morning.
Singapore: MAS Maintains Policy Stance On Core Inflation Risks
In line with market and our expectations, the MAS
maintained its exchange rate policy stance of a modest and gradual appreciation
of the SGD NEER with no change in the slope or width of the policy band, or
the level at which the band is centered. Core inflation remains a concern with
the MAS maintaining its forecast range of 2-3% but revised lower its headline
inflation forecast to 1.5-2.5%. While the current policy stance remained
appropriate to containing inflation, the MAS stated that it “will continue to
be vigilant over developments in the external environment, including in
financial markets, and stands ready to curb excessive volatility in the
S$NEER”.
We think what is appropriate would be a
S$NEER which is close to the mid-point of the band (i.e. assuming MAS call on
the Singapore fundamentals is correct) with around 2% appreciation with some
level of tolerance above the midpoint (around 0.0 to 1.0% above the midpoint,
i.e. stronger SGD to mitigate inflation pressures) with the occasional leaning
against the wind around periods of currency volatility or rapid movements of
the currency in any specific direction.
We maintain our forecast for the USD/SGD to peak at 1.2750 by end-2Q (in large part
due to our moderate dollar strength assumption by end 2Q 2014) before easing to
end the year at 1.2580 and then hover around 1.2600 by end-1Q 2015.
Our tech view on the USD/SGD: Despite
the upmove, we are still wary of bearish risks. The latest rise is an extension
of choppiness within the tight 1.2450-1.2530 range that we observed in the past
few days. MACD still points south. Furthermore, the 50-DMA (red dashed line)
and 100-DMA (black dashed line) are at the brink of a negative cross over.
Failure to sustain a move above the 1.2529-barrier could see more selling
action. 1.2426 marks the next support ahead of 1.2343.
Rgds,
Maybank FX Research
Global Markets
Maybank
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